The Securities and Exchange Board of India (SEBI) is undertaking a comprehensive review of several key market regulations, including the Listing Obligations and Disclosure Requirements (LODR) framework, delisting norms, derivatives markets, framework for independent directors (IDs), short selling and KYC norms for foreign investors and NRIs, as part of a broader effort to strengthen corporate governance, deepen capital markets and enhance investor confidence, Chairman Tuhin Kanta Pandey said.
The LODR framework is currently under review to make it more responsive to emerging governance and disclosure requirements, Pandey said.
“We will also review the delisting framework further. A well-developed capital market must provide fair entry and fair exit,” he said.
“Independent Directors play a crucial role in corporate governance. Their role is not limited to asking difficult questions on governance. They must contribute in board discussions on how best to address emerging challenges, such as, AI, cybersecurity, ESG, R&D, and rapid technological change,” Pandey said at the ET Now market summit.
At the same time, they must protect minority shareholder interests and support long-term value creation. SEBI will, therefore, work with all stakeholders to build a robust, scalable network for capacity building of Independent Directors, he said.
For foreign investors, SEBI will continue to ease access through simplifying KYC and a risk- based review of disclosure requirements.
“We will work with other regulators to ease the KYC process for NRIs. Our efforts will be to provide clarity that global capital seeks, especially in uncertain times,” he said.
Pandey said deepening the cash market is a priority. The Securities Lending and Borrowing and short selling frameworks are being comprehensively reviewed, to facilitate inter-linkage between the cash and derivatives markets and enhance liquidity, he said.
In commodity derivatives, SEBI’s proposals on extending early pay-in benefits to options contracts, phased shift from cash settlement to physical settlement in select agri-commodity contracts, and review of position limits are aimed at deepening participation and strengthening risk management, he said.
Electricity derivative contracts are being traded on our exchanges now. Longer-term and newer forms of contracts in this space will be required going forward.
“We will also be looking to bring in, along with RBI, derivatives on bond indices,” Pandey said.
“We are reviewing the Innovators Growth Platform so that strategic sectors like AI, semiconductors, clean energy, bio-tech, advanced materials, defence-tech can access our markets better for long-term capital,” he said.
“In debt markets, we are working on the market making framework for corporate bonds, deepening of the municipal bond market, and tokenization of corporate bonds.”
“AI will be an important part of our regulatory agenda. AI can improve surveillance, risk assessment, fraud detection, and investor servicing. But it also brings risks relating to opacity, bias, data protection, cybersecurity, and accountability,” he said.
SEBI will issue detailed guidelines on the responsible use of AI in capital markets. IOSCO’s AI Supervisory toolkit will also be suitably integrated into SEBI’s AI strategy for regulated entities, Pandey said.
He said the derivatives market also requires more development. Development of longer-term futures and options contracts in the equity derivatives market will be an important part of deepening the capital markets.
The regulations related to municipal debt and portfolio management services are also being reviewed. The objective is to address practical issues faced by stakeholders and ensure that these frameworks continue to support market development, the SEBI Chairman said.
SEBI’s reform proposals
- Review of the delisting framework
- Plans scalable network for capacity building of Independent Directors
- Reviewing the Innovators Growth Platform so that strategic sectors like AI, semiconductors, clean energy, bio-tech, advanced materials, defence-tech can access markets better for long-term capital
- Guidelines on the responsible use of AI in capital markets
- Municipal debt and portfolio management services are also being reviewed
- Derivatives on bond indices in consultation with RBI
- Securities Lending and Borrowing and short selling frameworks to be reviewed
- Simplifying KYC and a risk-based review of disclosure requirements for foreign investors under review
- Phased shift from cash settlement to physical settlement in select agri-commodity contracts
Tuhin Kanta Pandey said deepening the cash market is a priority. (PTI file photo) 
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